What is programmatic media buying?

Programmatic advertising is the use of automated technology for media buying (the process of buying advertising space), as opposed to traditional (often manual) methods of digital advertising. Programmatic media buying utilizes data insights and algorithms to serve ads to the right user at the right time, and at the right price.

To understand programmatic media buying, you must know the terminology related to this process. Firstly, programmatic media buying can be categorized into three different types:

• Real-time bidding (RTB): Also known as open auction, RTB is when inventory prices are decided through an auction in real time. As the name suggests, this is open to any advertiser or publisher. RTB is considered to be a cost effective way to buy media with a large audience.
• Private marketplace (PMP): These are similar to open auctions, but PMPs have restrictions on who can participate. Only selected advertisers have access to PMPs on an invite-only basis. However, in some cases publishers may have a selection process which allows advertisers to apply for an invitation.
• Programmatic direct: This is when a publisher bypasses auctions, selling media inventory at a fixed cost per mille (CPM) to an advertiser (or multiple advertisers).

The programmatic ecosystem also involves three main components:

• Sell-side platform (SSP): This is software that allows publishers to sell display, mobile and video ad impressions to potential buyers automatically in real time. This includes ad exchanges, networks and DSPs (see below). This gives publishers greater control of their inventory and CPMs.
• Demand-side platform (DSP): This is software that enables agencies and advertisers to buy ad inventory cross-platform.
• Ad exchanger: This is how the supply-side feeds inventory into the ad exchange. The DSP connects to the ad exchange, enabling advertisers, agencies, networks and publishers to buy and sell ad space. Inventory prices can then be agreed upon through the bidding process.

Ad inventory is usually bought via a real-time auction. Using programmatic channels, advertisers can buy per impression, thereby targeting the right audience. Since the process is automated, programmatic media buying guarantees speed and efficiency that is not matched in the traditional media buying.

The traditional media buying process involves a lot of manual work, typically with several requests for proposals (RFPs), human negotiations and manual insertions of the orders (IOs), which makes it slow and inefficient. Additionally, ads are purchased in bulk and advertisers have little control over the inventory and placement.

AppLovin Exchange (ALX) is the top mobile in-app RTB exchange, connecting buyers to over 60,000 mobile apps on over 1.5 billion mobile devices across the world. ALX works with 150+ DSPs to provide marketers, agencies, and ATDs access to a large volume of inventory. In the ALX auction environment, high-quality inventory is bought on a per-impression basis. Buyers gain direct access to the most competitive auctions with in-app SDK integration.